Starbucks, McDonald's have wide-ranging battle

It is a dramatic confrontation: McDonald's versus Starbucks, a real-life action drama pitting a fierce fast-food chain with 30,000-plus stores against a fierce gourmet coffee chain of more than 14,000 outlets. The world is their battlefield.

Some contend these two companies aren't direct competitors. But as they seek to increase profitability and expand worldwide, it is inevitable offerings and style will morph a bit. There are only so many ways to drink and eat quickly, short of intravenous feeding.

For stock investors, this is a standoff. Both McDonald's Corp., with outlets in more than 100 countries, and Starbucks Corp., in about half that many, have excellent financials with loads of cash.

There will be no friendly McStarbucks merger, no melding of cappuccino with fries. Hamburgler won't sing along with baristas to retrospective CD music.

McDonald's, which is making a major foray into gourmet coffee, recently reported its second quarterly loss in history because of writedowns in the book value of Latin American restaurants it sold, though earnings from continuing operations rose more than 24 percent. It has encountered increased chicken costs in the U.S. and must fend off criticism that fast food contributes to obesity.

Meanwhile, its popular "riceburger" introduced in China is being rolled out to other Asian nations.

Starbucks, which is making a push into additional food sales, reported profits rose 9 percent in its recent quarter thanks to store openings and international gains. It must cope with rising dairy costs and the much-publicized leaked internal memo from its chairman that questioned whether the past quality of the Starbucks experience is being maintained.

Meanwhile, its assorted merchandise in Starbucks stores and branded drinks in grocery stores continue to contribute to its bottom line.

No one knows when or if the world will become saturated with these two giants. Consumer tastes, after all, are fickle.

But no one said this fight would be an easy cruise through a drive-through window. Prepare for battle.